IRA Withdrawals May Not Be Taxed The Same Way
If you are a taxpayer who took a distribution during 2010, you may be wondering how the tax rate on IRA withdrawals in 2011 will impact it. The Internal Revenue Service has specific rules regarding IRA withdrawals. The tax information that is required to determine tax rates is important and each taxpayer should review all information carefully and if they have a question speak with a qualified tax preparer or a tax attorney for assistance. There are exceptions to early withdrawal tax penalties including:
Age matters - IRA withdrawals are typically allowed once a taxpayer reaches the age of 59 1/2. Withdrawals that are made by taxpayers younger than this are typically subjected to an automatic 10% tax penalty. There are some exceptions to this penalty including;
Medical expenses - taxpayers who have had unusual medical expenses may be allowed to withdraw funds from their IRA to pay those expenses provided they are 7.5% of their gross income or more;
Tax expenses - taxpayers who are facing a tax levy may be eligible to have part of their IRA distributed tax free to pay that levy;
First time homeowner - taxpayers who are first time home buyers or builders may take a distribution of up to $10,000 from their IRA for the purchase or construction of their home tax free;
Rollover to another plan - taxpayers who are interested in rolling their IRA funds into another plan may also be exempt from paying additional taxes on the distribution. There are specific rules that apply to this type of withdrawal;
Taxpayers who are disabled - in most cases, a taxpayer who is disabled will be exempt from paying additional taxes on their IRA distribution.
There are other exclusions to payment of taxes on IRA withdrawals that those who do not have the proper tax information would be unaware of. It is important to understand these exclusions completely when filing taxes.